Posts Tagged ‘IBM’

Where Have You Gone Bell Labs?

August 29, 2009

Management consultant Adrian Slywotzky wrote an incredible think piece and call to action in this week’s BusinessWeek. This is a must-read story about the future of America.

I couldn’t agree more with his conclusion that America needs another Manhattan Project or DARPA to inspire and stimulate the next blockbuster industry or two that will keep our nation prosperous and secure.

President Obama clearly appreciates the importance of science. Now he needs to take things to another level and launch the equivalent of our generation’s space race. And this story provides a blueprint to do that.

Where Have You Gone, Bell Labs?
How basic research can repair the broken U.S. business model

By Adrian Slywotzky
Name an industry that can produce 1 million new, high-paying jobs over the next three years. You can’t, because there isn’t one. And that’s the problem.

America needs good jobs, soon. We need 6.7 million just to replace losses from the current recession, then another 10 million to spark demand over the next decade. That’s 15 million to 17 million new jobs. In the 1990s, the U.S. economy created a net 22 million jobs (a rate of 2.2 million per year), so we know it can be done. Between 2000 and the end of 2007 (the beginning of the current recession), however, the economy created new jobs at a rate of 900,000 a year, so we know it isn’t doing it now. The pipeline is dry because the U.S. business model is broken. Our growth engine has run out of a key source of fuel—critical mass, basic scientific research.

The U.S. scientific innovation infrastructure has historically consisted of a loose public-private partnership that included legendary institutions such as Bell Labs, RCA Labs, Xerox PARC XRX, the research operations of IBM IBM, DARPA, NASA, and others. In each of these organizations, programs with clear commercial potential were supported alongside efforts at “pure” research, with the two streams often feeding one another. With abundant corporate and venture-capital funding for eventual commercialization, these research labs have made enormous contributions to science, technology, and the economy, including the creation of millions of high-paying jobs. Consider a few of the crown jewels from Bell Labs alone:
• The first public demonstration of fax transmission (1925)
• First long-distance TV transmission (1927)
• Invention of the transistor (1947)
• Invention of photovoltaic cell (1954)
• Creation of the UNIX operating system (1969)
• Technology for cellular telephony (1978)

DECLINE IN LAB FUNDING
In the decades after these initial discoveries, vibrant industries and companies were born. The transistor alone is the building block for the modern computer and consumer-electronics industries. Likewise, DARPA’s creation of the Internet (as ARPAnet) in 1969 and Xerox PARC’s development of the Ethernet and the graphic user interface (GUI) further developed the transformative computer and Internet industries. The basic research breakthroughs unleashed subsequent cycles of applied innovation that created entirely new sectors of our economy.

But since the 1990s, labs dedicated to pure research—to the pursuit of scientific discovery—have seen funding slowly decline and their mission shift from open-ended problem solving to short-term commercial targets, from pure discovery to applied research. Bell Labs had 30,000 employees as recently as 2001; today (owned by Alcatel-Lucent ALU) it has 1,000. That’s symbolic and symptomatic of the broken link in the U.S. business model. With upstream invention and discovery drying up, downstream, industry-creating innovation is being reduced to a trickle.

Click here to read the rest of the story.

IBM Bets on Brazilian Innovation

August 19, 2009

IBM Bets on Brazilian Innovation
Big Blue’s new initiative to stimulate development of Brazil’s nascent tech industry is the latest sign of the country’s rising power

By Spencer E. Ante

Over the last few years, China and India have emerged as the twin hot spots of emerging tech innovation. Now IBM (IBM) is betting that one of the next big technology stars will be Brazil.

In the latest sign of Brazil’s rising power, Big Blue is announcing on Aug. 18 a new initiative to stimulate the development of the country’s technology sector. To kick off the effort, IBM is hosting its first-ever forum for venture capitalists and entrepreneurs in São Paulo along with FINEP, the Brazilian government agency that finances technology development. The daylong event will bring together more than 100 investors and dozens of new companies looking for investment and business advice.

IBM is also launching a Portuguese version of its developerWorks Web site, which provides free programs and online teaching guides that help programmers build skills in the Java programming language, the Linux operating system, and IBM products such as Lotus. To host the event, IBM has dispatched Claudia Fan Munce, managing director of IBM Venture Capital Group, and Steve Mills, senior vice-president and group executive of IBM’s $20 billion Software Group, a clear sign of the growing importance of Brazil to the IBM portfolio.

“We have been watching Brazil for a while,” says Munce, who grew up in Brazil. “The time is right.”

Check out the rest of my BusinessWeek story here.

Can Oracle Make a Success of Sun?

April 21, 2009

I don’t know about you but I was pretty surprised when Oracle announced its intention to buy Sun Microsystems. It’s not just the thought that Sun’s business has been suffering from a slow and steady decline. It’s also the fact that Oracle has NEVER been in the hardware business. It’s a fairly radical move for a stand-alone software company to make a big bet on hardware. Most tech companies are moving in the opposite direction, dumping hardware assets and bulking up in software and services, a la IBM and Hewlett Packard.

But the more I think about it, the more this deal could actually make sense. For one, Sun is a software company, and many of its most valuable assets are in software. Namely, the Java programming language and the Solaris operating system. Moreover, by buying Sun, Oracle scoops up the number one rival in its core database business–open source database provider MySQL. This shrewd counter-attack alone may justify the price of the deal. Lastly, with Java under its wing, Oracle gets more leverage over IBM, which over the years has made a big investment in Java to counter Microsoft, and can offer more integrated technology solutions to its customers.

Still, Oracle has to overcome three main challenges to make this deal a success, as my colleague Aaron Ricadela noted in his story today. One, Oracle has got to find a way to wring more money out of Java without alienating its customer base. Two, Oracle needs to prove it can run a hardware business. Three, it has to do some pretty nifty financial engineering, including a massive layoff of more than 10,000 people, to make the numbers work over the long term.

As one top tech CEO told us recently, Sun will be an accretive deal for the first 18 to 24 months, thanks to the cost cuts that can be made. But the real challenge will come after when those gains run out, and the server business continues to decline.

Come See Me Speak at Stanford Next Friday

March 22, 2009

A quick speaking update: I have been invited to moderate a panel at the Stanford Global Technology Symposium on Friday March 27. The event will be held at the Arrillaga Alumi Center on the Stanford campus. This year’s theme couldn’t be more timely “Entrepreneurship and Investment in a Turbulent Economy.”

T. Boone Pickens, Facebook COO Sheryl Sandberg and venture capitalist Steve Jurvetson are giving keynote addresses or fireside chats.

We’ve got a great panel. The topic is corporate venture capital and we’ve lined up top executives from IBM (Claudia Fan Munce), Microsoft (Dan’l Lewin) and Google (David Lawee) to participate. My panel is from 3pm – 4pm.

Please come and say hello. I may be selling books afterwards.

Upcoming Event: IBM Talk on 10/30

October 22, 2008

Attention IBMers! I am happy to report that I have been invited to give a book talk and signing at IBM on October 30. The talk will be held in IBM’s Somers, N.Y. campus. Having covered Big Blue over the years, I’ve met a lot of IBM folks. If any of you are in Somers or the surrounding area, please come on by and say hello.

Here’s the copy from the invite.

Come join us at Somers CSB Auditorium
Thursday, October 30
10:00-11:30 a.m.

Reserve your spot now!

Our featured speaker is Spencer Ante, author of Creative Capital: Georges Doriot and the Birth of Venture Capital, recently released by Harvard Business Press. Spencer has been covering the tech industry for most of his career and has been with BusinessWeek for the past eight years. He will be discussing his new book plus overall trends in venture capital investing and the IT industry, overall.

The first 100 attendees will be given a copy of book.

IBM, eBay, Google: Tech Earnings Season Preview (Plus the iPhone App Store)

July 13, 2008

In this week’s broadcast of the Digital Dish, the BW tech team talks about Microsoft’s support for Carl Icahn’s moves to oust the board at Yahoo and revive takeover talks. Plus, the upcoming earnings season, and of course, the iPhone.

Check out the video here.

The Tech Earnings Safe Zone: Google, IBM, Intel and ???

April 20, 2008

Surprise! BusinessWeek reporters Spencer Ante, Heather Green, Arik Hesseldahl and Catherine Holahan dissect the big earnings reports from Google, IBM, Intel, Nokia and eBay. Watch the Digital Dish gang explain the washout that wasn’t.

HOW TO BUY CREATIVE CAPITAL: To pre-order Creative Capital and get a 34% discount, click here and go to Amazon

Reader Mail: Did DEC hire a PR firm and run a campaign against IBM?

February 20, 2008

Yesterday, a former assistant managing editor of BusinessWeek who ran our overseas bureaus, Robert Dowling, was kind enough to post a comment on the blog about the development of Digital Equipment Corp. I bumped into Bob a few weeks ago at an event for the Asia Society. I was pleasantly shocked when he told me he actually moved to China, where he is serving as an editorial advisor to Caijing Magazine, the top business mag in China from what I hear.

In many ways, blogs are all about reader and writer interaction. So I am going to start a new feature today called “Reader Mail.” From time to time, I will post a good question by a reader and then answer it.

Bob asks: 

“Hi Spencer:
Congrats on the book and blog. That’s an interesting and unexpected angle on DEC, and the VC community. I wonder what behaviors, typical of VC-backed start-ups, did DEC exhibit in those early days? For example, did they hire a PR firm and run a competitive campaign for share of voice against IBM?
Best,
Dowling”

spencerante says:

As far as I know, DEC was not a big user of PR firms. But the company was very savvy in its use of public relations–a lot of which came from General Doriot.

Every spring, Doriot held an annual meeting for American Research & Development. At the meeting, Doriot always organized an exhibit of ARD’s portofolio companies, where they could show off their products to the public and the press. Doriot also encouraged entrepreneurs to use the annual meeting as an opportunity to make important announcements.

The events were always well attended and often generated lots of ink and coverage. BusinessWeek, in fact, ran many stories that came out the event.  It was sort of the first high-tech trade show in a sense and was very innovative for its time.

Here’s a bit from my book about the meetings and their impact. It is based on the 1952 annual meeting, when the New York Times wrote a page one story about Ionics, a water purification company financed by ARD.

“At the end of the meeting, MIT Chemical Engineering Professor Gilliland stood up behind a podium and announced a startling new development. Gilliland, who doubled as the president of Ionics, demonstrated the company’s new membrane that desalinated seawater more cheaply than any other existing technology. The demo and related testimony by Dr. Compton and Harvard chemistry professor and Ionics director Arthur B. Lamb was so compelling that the New York Times published a page one story about the development: “New Process Desalts Seawater; Promises to Help Arid Areas.” The story written by William L. Laurence hailed a “revolutionary new process for desalting seawater” that promised to “open up vast new reservoirs of fresh water for use in agriculture, industry and the home wherever water is now scarce.”

The page one scoop was a coup for both ARD and Ionics, generating publicity and contracts for the new company. After it came out, Senator Flanders received a visit from Sheridan Downey, a former U.S. Senator from California. Downey, who was representing the city of Long Beach, said he was “tremendously interested in the announcement” and expressed a desire to jump-start the first field trials of the technology for the city. Senator Flanders arranged for Downey to speak with Ionics cofounder and vice president Walter Juda. The meetings eventually led to one of Ionics’s first commercial contracts. In the mid-1950s, the town of Coalinga, California purchased a system from Ionics, replacing the water supply it formerly brought in by railway.”

How IBM’s Venture Capital Group Can Help Your Startup

January 25, 2008

The other day I had a chance to meet Claudia Fan Munce, managing director of IBM’s VC group since March 2004.  Born in Taiwan and raised in Brasil, Munce is a double threat with a Master of Science in Electrical Engineering from Santa Clara University and an MBA from Stanford.

Munce

While many VC arms of corporations invest directly in startups, Munce has fashioned a totally different strategy for Big Blue. IBM does not actually invest money in companies. Rather, Munce helps IBM form strategic relationships with hundreds of startups that can help the company deliver technologies that solve customer problems.  “The measurement we had was never financial return,” she says. “We take that strategic aspect and feed it back to the company.”

Since its formation in 2000, IBM has gone from working with 20 VC-backed startups to more than 1,300 today. Her group helps these young companies navigate the labyrynthian bureaucracy of Big Blue, connecting them with various business units, and offering them managerial advice and support. Munce and her team will help entrepreneurs with marketing, connect them with customers and sometimes fund joint development projects. “We invest very heavily in building these partnerships,” says Munce.

And every now and then, those relationships end up with IBM acquiring the company. Over the last few years, Munce says that IBM has scooped up 18 companies that have worked with the VC group, including Corio, Bowstreet, AlphaBlox, Trigo and most recently, AptSoft.

Currently, Munce says IBM is really focused on forging relationships with startups focused on blade servers, virtualization software and green technology. “The utility industry has always been a big customer of IBM,” says Munce. “And IBM has so many data centers around the world. The power management side is very important. Governments are asking IBM to come up with a solutiion to deliver power in a more efficient way.”

HOW TO BUY CREATIVE CAPITAL: To pre-order Creative Capital, click here to go to Amazon.com.

Valley Boy: Part 2 of an Interview with VC Pioneer Thomas J. Perkins

January 21, 2008

First off, some shout-outs are in order: Thanks to three of my favorite Web pubs–New York Times DealBook, Silicon Alley Insider and Valleywag–for linking to the first part of the Creative Capital interview with venture capital pioneer Thomas J. Perkins.

And now, in the promised second part, Perkins talks in depth about how he helped turn around Hewlett-Packard by forming a technology committee (a key move to boosting profits was dumping Intel chips for AMD chips), the pre-texting scandal and why he disagreed with Patty Dunn over practically everything. “Patty Dunn and I didn’t agree on the time of day,” says Perkins.

What struck me in re-reading the interview is the amount of passion that Perkins brings to his job, his love and deep understanding of the technology business, and the way that his battle with HP became personal. In fact, Perkins was so mad at the company for the way it handled the spying scandal that afterwards he bought chose to buy a computer from Lenovo–and not HP!!! “I was kind of mad at HP,” says Perkins.

Perkins

What did you think about the 60 Minutes interview?
She kept asking me how much money I made. They tape hours. I thought it was OK. I wouldn’t have done it if it wasn’t Leslie Stahl. She kept saying, “This is not going to be about HP.” Of course, we ended up talking a lot about HP. I guess that was inevitable.

How do you think HP is doing?
I have no insider information. I am not on the board and Mark doesn’t call me up and tell me things. From what I can see, it’s in great shape. I have tremendous respect for Mark. He’s really smart and works well. He understands and has cultivated the technology. He has a real good relationship with the chief technology officer, Shane Robison, who I think walks on the water.

How much of the past problems were about leadership and how much were about strategy?
Strategy has changed. We did something unusual at HP when I joined the board. With Carly’s blessing, we set up a technology committee. The combined company was spending pretty close to $5 billion a year on R&D and the board was oblivious to what was going on. It’s a huge amount of money. So we established this committee. It eventually became the whole board. It met the day before the board meetings and really got into the strategic aspect of HP. The support of that committee made it possible for Carly and Mark to take some risks with the understanding that the board was behind us.

What were the risks?
There were three things. HP had had a very liberal technology licensing policy. Any salesman could mortgage the patent portfolio to get the next order. HP was actually paying out $100 million a year in royalties to others, and IBM, with a patent portfolio marginally larger, is taking in $3 billion a year. At the first meeting of the technology committee we changed that. I insisted that every single license had to be signed by Carly Fiorina. It was abrupt but it is working.

The second thing we did was to spend some money and get serious about competing against Dell Direct. Compaq had made a good start but the HP Web site was a nightmare. So we invested pretty heavily in that.

But the most important thing was we encouraged the company to redirect a lot of purchases of microprocessors to AMD from Intel. We slowly and gradually encouraged management to move in that direction. They did. A lot of the improvement of HP’s [profits] is a result of that. It was kind of touch-and-go for a few quarters as to whether we could do it or not, and we did. This is an example of how a board of directors can really help management. When Mark came in he did all that and more.

Is HP now making money off of its patent portfolio?
Yes.

Is it substantial?
Yes, and growing. A lot of these contracts have to expire.

Has Mark made it safe for technologists?
Yes. And you didn’t ask, but in my opinion he knew next to nothing about the spy thing. I apologized to Mark. I told him your job is to fix HP. My job is to fix the board. And I ended up resigning. He called me up and said, “Geez, how could you do this to me?”

Is it fixed now?
I think so. I still have some friends on the board and they say it’s humming.

Have you followed the Lenovo after it purchased the IBM PC company?
Only to buy one of the computers. It’s terrific.

You bought Lenovo instead of an HP?
I did. I also have an HP. I was kind of mad at HP. (Laughs)

HOW TO BUY CREATIVE CAPITAL: To pre-order Creative Capital and get a 34% discount, click here and go to Amazon

Who serves the role on the board now of championing technology?
There are still a few geeks on the board and there is still a technology committee. The key thing I wanted, and this is against the venture capital model, I wanted Mark to be chairman of the board. A company of that size, he had to be chairman, he had to set the agenda for the board. And that was fundamental difference between Patty Dunn and myself. What does the board do?

You meet at 8:30am and planes have to be caught around 1pm. An audit committee meeting can take an hour and you’ve got all the other committees. And then it’s almost time for lunch and you have a few minutes to talk about competition, strategy, growth rate, succession, the future, fundamentally important stuff. And it tends to get scrunched into a very limited amount of time. And if you don’t even think it’s important, it doesn’t get discussed. So Dunn and I really disagreed on that. I just felt the board had to keep the pressure on–marketing, engineering, succession, competition, doing it on and on.

Also Dunn and I disagreed on what kind of directors we should bring on to the board. I wanted to bring more entrepreneurs from Silicon Valley onto the board. Why? The product life-cycle of Silicon Valley is 18 months. And if you miss a cycle and you’re in real trouble. The sense of urgency about it all is essential to have on the board. Dunn felt we had to bring on people that Wall Street would know and appreciate. So we had a hell of a time.

So you’re saying the board trouble was over the chairman role? What about the pre-texting thing?
Carly Fiorina, not me, has said that the spy scandal was Dunn’s method of restructuring the board. Her primary hope was that I was the leaker. I wasn’t. Turns out she got rid of me and [George] Keyworth at the same time. Carly said that. I don’t dare say that.

So it was not at the root of your disagreement?
It was a lot of things. Dunn and I didn’t agree on the time of day. We started off pretty well. I encouraged her to be chairman. I got her some extra money. I encouraged her to be very active. And we would meet monthly and speak more frequently on the telephone. But it just became really tough going.

How did the relationship sour?
A little bit on all fronts. It was no one big thing. Directors, strategy, compliance experts, how the board spent its time, all these things.

If you had not resigned would all of these things have come out?
If I hadn’t resigned it would not have come out and Patty would still be getting awards for brilliant governance. I didn’t blow the whistle. I tried to get the company to fix it and investigate itself, and primarily stop doing it. If they had taken a serious look at it, I didn’t see how Dunn could continue as chairman.

I thought she could stay on the board. I thought the board would evolve into that conclusion but they didn’t. They stonewalled me for about three and a half months. My lawyer said, “Look Tom, you were chairman of governance. This theoretically all happened under your purview. You’ve got to tell the Securities and Exchange Commission.” So I did. And the SEC went public.

I thought a lot about it. In the end, I felt Dunn did not want to stop being chairman, that’s for sure. And I felt that she was pulling the company into a very bad place. So I decided to fall on my sword.

HOW TO BUY CREATIVE CAPITAL: To pre-order Creative Capital and get a 34% discount, click here and go to Amazon


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